EBITDA: SEK1.65 billion, with an EBITDA margin of 32%. Net Sales: Increased 13% to just below SEK5.2 billion. Net Income: SEK800 million or SEK1.14 per share. Industrial Return on Capital Employed: 8% for the first quarter. Leverage: 1.5. Forest Segment Sales: Increased to SEK2.5 billion. Wood Segment Sales: Increased 37%, EBITDA up 113%, margin increased from 10% to 16%. Pulp Segment Sales: Increased 9%, EBITDA flat compared to last year. Containerboard Sales: Up 2%, EBITDA up 70%. Renewable Energy EBITDA: SEK134 million, margin of 22%. Operating Cash Flow: SEK485 million. Net Debt: SEK11 billion, with a net debt to equity of 11%.

Warning! GuruFocus has detected 5 Warning Signs with SVCBF.

Release Date: April 25, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Svenska Cellulosa AB (SVCBF) achieved an EBITDA of SEK1.65 billion, with a strong EBITDA margin of 32% for Q1 2025. The company demonstrated strong delivery volumes, particularly in the wood segment, due to productivity improvements. Strategic investments in Obbola, Ortviken, and Gothenburg are expected to enhance productivity and cash flow in the coming years. Prices in the industrial segments were generally higher in Q1 2025 compared to Q1 2024, contributing positively to earnings. Svenska Cellulosa AB (SVCBF) maintains a high degree of self-sufficiency in wood raw materials, mitigating the impact of increased raw material costs.

Negative Points

Global uncertainty, including US tariffs, has increased, affecting demand and the business climate. The market for solid wood products remains slow, with uncertainties due to tariff discussions between the US and other countries. The renewable energy segment experienced a weaker quarter compared to the previous year, with low electricity prices impacting the wind business negatively. Higher costs for wood raw materials negatively impacted EBITDA despite higher prices and volumes. Currency fluctuations, particularly the strengthening of the Swedish kroner, have had a negative impact on pricing in local currencies.

Q & A Highlights

Q: How has the recent escalation in tariff frictions affected European box demand and containerboard price hikes? A: Ulf Larsson, CEO, stated that it is too early to determine the impact of tariff frictions on demand. The primary driver for price increases is the rising cost of raw materials, particularly OCC. Demand has been stable, but the overall market uncertainty is not favorable.

Q: Can you provide details on SCA's currency exposure and hedging strategy? A: Andreas Ewertz, CFO, explained that SCA's net exposure is approximately $600 million in USD, EUR400 million, and GBP100 million. The company follows a statistical model for hedging, maintaining a range that adjusts based on currency fluctuations.

Story Continues

Q: What is the current status of pulpwood and log availability, and how do you expect prices to develop in Q2? A: Andreas Ewertz noted that prices for pulpwood and sawlogs increased by 5-6% from Q4 to Q1. For Q2, a further increase of 3% for pulpwood and 5% for sawlogs is expected. Ulf Larsson added that the market is more balanced for pulpwood, but sawlog prices remain high.

Q: How are US tariffs impacting SCA's pulp exports and overall business sentiment in Europe? A: Ulf Larsson mentioned that the 10% tariff on European pulp exports to the US, compared to zero for Canadian exports, has not yet impacted SCA's flow. However, if the situation persists, SCA may need to redirect volumes to other markets, primarily Asia.

Q: What potential do you see for raising NBSK prices in Europe given the US tariffs and market conditions in China? A: Ulf Larsson indicated that the NBSK index price in Europe is around $1,600, with a recent $30 per ton increase in the US. The market in Asia is currently in a "wait and see" mode, and further price developments are uncertain.

Q: How is the ramp-up of the Obbola machine affecting containerboard volumes and market dynamics? A: Ulf Larsson explained that the decrease in containerboard volumes is more of a seasonal effect. The ramp-up of the Obbola machine is progressing well, with production records being set, and the company is satisfied with the progress.

Q: How will the stronger SEK impact SCA's competitive position, and are there plans to mitigate this through cost-cutting or structural changes? A: Ulf Larsson emphasized the ongoing focus on cost efficiency and productivity. While no specific programs are planned, the company aims to control costs and improve efficiency as part of its strategic investments.

Q: What is SCA's strategy for wind projects given the current environment and lower car prices? A: Andreas Ewertz stated that SCA aims to be self-sufficient in wind power and does not plan to become a net seller of electricity. The company will continue to develop projects and sell them as part of its business strategy.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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